GE, by almost all measures, is the rare (only?) enormous American firm that has outperformed the stock market over almost a century. Hence the shock value of Sunday's headline in the biz section of the New York Times: "Is GE Too Big for Its Own Good?" Observers, including many on Wall Street, are beginning to whisper, "Break it up," following a half dozen years of flaccid performance.
The day before I'd been lecturing in Nairobi—and the first two rows of the amphitheater had included a staggering share of Kenya's Big Company CEOs. My unrelenting message: Giant companies are stinkers when it comes to long-term performance.
A few of the slides I used:
"[Richard] Foster and his McKinsey colleagues collected detailed performance data stretching back 40 years for 1,000 U.S. companies. They found that none of the long-term survivors managed to outperform the market. Worse, the longer companies had been in the database, the worse they did."—Financial Times
"The difficulties ... arise from the inherent conflict between the need to control existing operations and the need to create the kind of environment that will permit new ideas to flourish—and old ones to die a timely death. ... We believe that most corporations will find it impossible to match or outperform the market without abandoning the assumption of continuity. ... The current apocalypse—the transition from a state of continuity to state of discontinuity—has the same suddenness [as the trauma that beset civilization in 1000 A.D.]"—Richard Foster & Sarah Kaplan, "Creative Destruction" (The McKinsey Quarterly)
"Of Korea's Top 100 companies in 1955, only seven were still on the list in 2004. The 1997 financial crisis 'destroyed half of Korea's 30 largest conglomerates.'"—from "KET Issue Report," Kim Jong Nyun
"I am often asked by would-be entrepreneurs seeking escape from life within huge corporate structures, 'How do I build a small firm for myself?' The answer seems obvious: Buy a very large one and just wait."—Paul Ormerod, Why Most Things Fail: Evolution, Extinction and Economics
"A pattern emphasized in the case studies in this book is the degree to which powerful competitors not only resist innovative threats, but actually resist all efforts to understand them, preferring to further entrench their positions in the older products. This results in a surge of productivity and performance that may take the old technology to unheard-of heights. But in most cases this is a sign of impending death."—Jim Utterback, Mastering the Dynamics of Innovation
"The more successful a company, the flatter its forgetting curve."—Gary Hamel and C.K. Prahalad
"You don't get better by being bigger. You get worse."—Dick Kovacevich, CEO, Wells Fargo
"Despite a decade of banking mergers, there is no evidence that big banks are any more efficient or profitable than their smaller rivals."—Financial Times, on possible Barclays-ABN Amro merger ("When it comes to asking the stock market whether bigger banks are better, the current answer is a resounding 'no.'"—Citigroup analysis, 2006)
"'Good management' was the most powerful reason [leading firms] failed to stay atop their industries. Precisely because these firms listened to their customers, invested aggressively in technologies that would provide their customers more and better products of the sort they wanted, and because they carefully studied market trends and systematically allocated investment capital to innovations that promised the best returns, they lost their positions of leadership."—Clayton Christensen, The Innovator's Dilemma, on the conservatism that cripples very large firms
"Recently I asked three corporate executives what decisions they had made in the last year that would not have been made were it not for their corporate plans. All had difficulty identifying one such decision. Since all of the plans are marked 'secret' or 'confidential,' I asked them how their competitors might benefit from possession of their plans. Each answered with embarrassment that their competitors would not benefit."—Russell Ackoff (from Henry Mintzberg, The Rise and Fall of Strategic Planning)
One Kenyan CEO asked if I truly thought there was, effectively, no hope for the Giants. I wandered around the issue and concluded, "Yup, no hope."
So what the hell was the point of the seminar, the point of my 7,000 mile trip, at least for the Big Co gang?
Plenty, I think.
That is "no hope" is a dire warning that typical, conservative Big Co strategies are indeed designs for disaster. And I think that is liberating. The message is, "The odds are stacked against you, hence you in effect have damn near nothing to lose—so swing for the fences and you at least up the odds a bit of performing well."
I often say (and did again in Kenya) that I've learned but one thing in 40 years, since I began my management career as a military (Navy) construction engineer in Vietnam in 1966. And that is ... "try stuff" ... faster than the next guy. ("We have a 'strategic plan.' It's called doing things."—Herb Kelleher, Southwest Airlines.) And keep on tryin' stuff.
Hence this "ultimate" slide on success and failure:
Life 101: A 40-year Reflection
Go on offense.
Give everybody a shot.
Try a bunch of stuff.
Make it up as you go along.
Get some stuff wrong.
Laugh a lot.
Get some stuff right.
Who knows, you might get lucky ...
Extract "lessons learned" or "best practices."
Thicken the Book of Rules for Success.
Become evermore serious.
Enforce the rules to increasingly tight tolerances.
Go on defense.
Protect-at-all-costs today's franchise.
Install taller walls.
Write more rules.
Become irrelevant and-or die.
Attached you'll find a very brief PowerPoint, from the sub-section titled "Try It" in the section called "Innovation Tactics" in Part II of our Master Presentation ("Innovate. Or. Die.")
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